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PROSPECTUS 333-47995
Rule 424(b)(3)
140,000 Shares
SOUTHWEST BANCORPORATION OF TEXAS, INC.
COMMON STOCK
This prospectus (this "Prospectus") relates to the periodic offer and sale
of up to an aggregate of 140,000 shares (the "Shares") of Common Stock, $1.00
par value per share ("Common Stock"), of Southwest Bancorporation of Texas,
Inc., a Texas corporation (the "Company"), for the account of certain selling
shareholders (the "Selling Shareholders") of the Company. See "Selling
Shareholders." The offering of Shares hereunder will terminate on or before
February 5, 2000.
The Common Stock is registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is listed for trading
on The NASDAQ Stock Market ("NASDAQ") under the trading symbol "SWBT." On
April 7, 1998, the last reported sale price of the Common Stock on NASDAQ was
$39.25 per share. The Shares may be sold at market prices prevailing at the
time of sale or at negotiated prices. The Company will not receive any of the
proceeds from the sale of Shares by the Selling Shareholders. Each Selling
Shareholder is a party to an Agreement and Plan of Reorganization dated as of
February 5, 1998, with the Company, pursuant to which the Company will pay all
expenses of registration of the sale of the Shares, estimated at $20,000.
The address of the executive offices of the Company is 4400 Post Oak
Parkway, Houston, Texas 77027, and the telephone number of the Company is (713)
235-8800.
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SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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No person has been authorized to give any information or to make any
representation contained or incorporated by reference in this Prospectus and, if
given or made, such information or representation must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offer to sell or a solicitation of any offer to buy any securities other than
the Common Stock offered by this Prospectus, or an offer to sell or a
solicitation of an offer to buy the Common Stock in any jurisdiction to or from
any person to whom it is unlawful to make such offer or solicitation in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to the date
hereof.
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The date of this Prospectus is April 7, 1998.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W.; Washington, D.C. 20549, and at the following Regional Offices of
the Commission: Midwest Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and Northeast Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material also can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates, or from
the site maintained by the Commission on the Internet World Wide Web at
http//www.sec.gov. In addition, copies of reports filed with the Commission may
be inspected at the Nasdaq Stock Market, 80 Merritt Boulevard, Trumbull,
Connecticut 06611.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Reference is made
to the Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Common Stock offered hereby.
Any statements contained herein concerning the provisions of any document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission or incorporated by reference herein are not necessarily complete, and
in each instance reference is made to the copy of such document so filed for a
more complete description of the matter involved. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, filed with the Commission by the Company pursuant
to the Exchange Act, are incorporated herein by reference and made a part of
this Prospectus:
(i) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997; and
(ii) Description of the Common Stock contained in the Company's
Prospectus dated January 27, 1997, which description is included in the
Company's Registration Statement on Form S-1 (Registration Statement
No. 333-16509).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act, subsequent to the effective date of this
Registration Statement, prior to the filing of a post-effective amendment to
this Registration Statement indicating that all securities offered hereby have
been sold or deregistering all securities then remaining unsold, shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such documents. Any statement contained herein or in any document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Registration Statement to the
extent that a statement contained in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this Registration Statement, except as so
modified or superseded.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner of any of the Common Stock to whom a copy of this
Prospectus has been delivered, on the written or oral request of such person, a
copy of any or all of the documents referred to above which have been
incorporated by reference in this Prospectus, other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
such documents. Written or oral requests for such copies should be directed to
Controller, Southwest Bancorporation of Texas, Inc., 4400 Post Oak Parkway,
Houston, Texas 77027; telephone: (713) 235-8800.
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RISK FACTORS
Prospective purchasers of the Shares offered hereby should carefully
review the information contained elsewhere or incorporated by reference in
this Prospectus and should particularly consider the following matters.
Information contained in this Prospectus contains "forward-looking
statements" which can be identified by the use of forward-looking terminology
such as "believes," "expects," "anticipates," "intends," "plans," "seeks" or
"estimates" or the negative thereof or other variations thereon or comparable
terminology. No assurance can be given that the future results covered by
the forward-looking statements will be achieved. The following matters
constitute cautoinary statements identifying important factors with respect
to such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to vary materially from the
future results covered in such forward-looking statements. Other factors,
such as the general state of the economy, could also cause actual results to
vary materially from the future results covered in such forward-looking
statements.
EXPOSURE TO LOCAL ECONOMIC CONDITIONS
The Company's success is dependent to a significant extent upon general
economic conditions in the Houston metropolitan area. The banking industry
in Texas and Houston is affected by general economic conditions such as
inflation, recession, unemployment and other factors beyond the Company's
control. During the mid-1980's, severely depressed oil and gas prices
materially and adversely affected the Texas and Houston economies, causing
recession and unemployment in the region and resulting in excess vacancies in
the Houston real estate market and elsewhere in the state. Since 1987, the
local economy has improved in part due to its expansion into non-energy
related industries. As the Houston economy has diversified away from the
energy industry, however, it has become more susceptible to adverse effects
resulting from recession in the national economy. Economic recession over a
prolonged period of time in the Houston area could cause significant
increases in nonperforming assets, thereby causing operating losses,
impairing liquidity and eroding capital. There can be no assurance that
future adverse changes in the local economy would not have a material adverse
effect on the Company's consolidated financial condition, results of
operations or cash flows.
INTEREST RATE RISK
The Company's earnings depend to a substantial extent on "rate
differentials," i.e., the differences between the income the Company receives
from loans, securities and other earning assets, and the interest expense it
pays to obtain deposits and other liabilities. These rates are highly
sensitive to many factors which are beyond the Company's control, including
general economic conditions and the policies of various governmental and
regulatory authorities. For example, in an expanding economy, loan demand
usually increases and the interest rates charged on loans usually increase.
Increases in the discount rate by the Federal Reserve Board usually lead to
rising interest rates, which affect the Company's interest income, interest
expense and securities portfolio. Also, governmental policies such as the
creation of a tax deduction for individual retirement accounts can increase
savings and affect the Company's cost of funds. From time to time,
maturities of assets and liabilities are not balanced, and a rapid increase
or decrease in interest rates could have an adverse effect on the net
interest margin and results of operations of the Company. The nature, timing
and effect of any future changes in federal monetary and fiscal policies on
the Company and its results of operations are not predictable.
COMPETITION
The banking business is highly competitive, and the profitability of the
Company depends principally upon its ability to compete in the Houston
metropolitan area. In addition to competing with other commercial and savings
banks and savings and loan associations, the Company competes with credit
unions, finance companies, mutual funds, insurance companies, brokerage and
investment banking firms, asset-based non-bank lenders and governmental
organizations that may offer subsidized financing at lower rates than those
offered by the Company. Many of such competitors have significantly greater
financial and other resources than the Company. Although the Company has been
able to compete effectively in the past, no assurance can be given that the
Company will continue to be able to compete effectively in the future. Various
legislative acts in recent years have led to increased competition among
financial institutions. There can be no assurance that the United States
Congress will not enact legislation that may
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further increase competitive pressures on the Company. Competition from both
financial and non-financial institutions is expected to continue.
SUPERVISION AND REGULATION
Bank holding companies and banks operate in a highly regulated environment
and are subject to extensive supervision and examination by federal and state
regulatory agencies. The Company is subject to the Bank Holding Company Act of
1956, as amended (the "BHCA"), and to regulation and supervision by the Federal
Reserve Board. The Company's subsidiary, Southwest Bank of Texas National
Association ("SW Bank"), as a national banking association, is subject to
regulation and supervision by the OCC and, as a result of the insurance of its
deposits, the Federal Deposit Insurance Corporation (the "FDIC"). These
regulations are intended primarily for the protection of depositors, rather than
for the benefit of investors. The Company and SW Bank are subject to changes in
federal and state law, as well as changes in regulation and governmental
policies, income tax laws and accounting principles. The effects of any
potential changes cannot be predicted but could adversely affect the business
and operations of the Company and SW Bank in the future.
Federal Reserve Board policy requires a bank holding company such as the
Company to serve as a source of financial strength to its banking subsidiaries
and commit resources to their support. The Federal Reserve Board has required
bank holding companies to contribute cash to their troubled bank subsidiaries
based upon this "source of strength" regulation, which could have the effect of
decreasing funds available for distributions to shareholders.
The Company's principal source of funds is cash dividends from SW Bank.
The payment of dividends by SW Bank to the Company is subject to restrictions
imposed by federal banking laws, regulations and authorities. Without approval
of the OCC, dividends in any calendar year may not exceed SW Bank's total net
profits for that year, plus its retained profits for the preceding two years,
less any required transfers to capital surplus or to a fund for the retirement
of any preferred stock. In addition, a dividend may not be paid in excess of a
bank's cumulative net profits after deducting bad debts in excess of the
allowance for loan losses. As of December 31, 1997, approximately $37.7 million
was available for payment of dividends by SW Bank to the Company under these
restrictions without regulatory approval.
The federal banking statutes also prohibit a national bank from making any
capital distribution (including a dividend payment), if, after making the
distribution, the institution would be "undercapitalized," as defined by
statute. In addition, the relevant federal regulatory agencies also have
authority to prohibit a national bank from engaging in an unsafe or unsound
practice in conducting its business, as determined by the agency. The payment
of dividends could be deemed to constitute such an unsafe or unsound practice,
depending upon the financial condition of SW Bank. Regulatory authorities could
also impose administratively stricter limitations on the ability of SW Bank to
pay dividends to the Company if such limits were deemed appropriate to preserve
SW Bank's capital.
DEPENDENCE ON KEY PERSONNEL
The Company and SW Bank are dependent on certain key personnel, including
Walter E. Johnson, Paul B. Murphy, Jr., Joseph H. Argue, Yale Smith, Steve D.
Stephens, J. Nolan Bedford, Sharon K. Sokol and David C. Farries, each of whom
has relationships with customers of SW Bank that the Company considers important
to its business. The loss of such individuals or other members of senior
management could have an adverse effect on the Company's growth and
profitability. Neither the Company nor SW Bank maintains any key man life
insurance policy on any of these individuals or any other member of senior
management.
CERTAIN CHARTER AND BYLAW PROVISIONS
The Company's Articles of Incorporation and Bylaws contain certain
provisions that could delay, discourage or prevent an attempted acquisition or
change of control of the Company. These provisions include (i) a Board of
Directors classified into three classes with the directors of each class having
staggered, three-year terms, (ii) a provision establishing certain advance
notice procedures for nomination of candidates for election as directors and for
shareholder proposals to be considered at an annual meeting of shareholders and
(iii) a provision that special meetings of the shareholders of the Company may
be called by shareholders only upon the written request of holders of at least
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33 1/3% of the outstanding shares of capital stock entitled to vote at any such
meeting. The Company's Articles of Incorporation authorize the Board of
Directors of the Company to issue shares of preferred stock without shareholder
approval and upon such terms as the Board of Directors may determine. The
issuance of preferred stock, while providing desirable flexibility in connection
with possible acquisitions, financings and other corporate purposes, could also
have the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, a controlling interest in the
Company.
THE COMPANY
The principal executive offices of the Company are located at 4400 Post Oak
Parkway, Houston, Texas 77027, and its telephone number is (713) 235-8800.
Unless the context requires otherwise, references herein to the "Company"
include Southwest Bancorporation of Texas, Inc. and its subsidiary, SW Bank.
For additional information regarding the Company, see the documents specified in
"Incorporation of Certain Information by Reference."
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares offered hereby.
SELLING SHAREHOLDERS
The Common Stock covered by this Prospectus is to be offered for the
account of the Selling Shareholders. The Selling Shareholders are:
<TABLE>
<CAPTION>
Number of Shares of
Number of Shares of Common Number of Shares of Common Stock to be
Stock Owned Prior Common Stock Owned After Completion
Name of Selling Shareholder to Offering Offered Hereunder Of Offering
- --------------------------- -------------------------- ------------------- ----------------------
<S> <C> <C>
Joel Rosenthal 43,750 43,750 - 0 -
Gregory L. Brown 43,750 43,750 - 0 -
Allan D. Rosenthal 17,500 17,500 - 0 -
Norman Rosenthal 17,500 17,500 - 0 -
Larry Sondock 18,500 17,500 1,000
</TABLE>
On February 5, 1998, the Selling Shareholders transferred substantially
all of the business and assets of City Financial Services, Inc. ("CFS") and
First Republic Capital Corp. ("FRC") to SW Bank in exchange for the Shares,
and Joel Rosenthal and Gregory L. Brown entered into three-year Employment
Agreements with the Company, pursuant to which they each hold the position of
Senior Vice President of SW Bank and manage the business formerly owned by
CFS and FRC as a division of SW Bank.
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Shareholders that the Shares
may from time to time be offered for sale either directly by the Selling
Shareholders or through underwriters, dealers or agents or on any exchange on
which the Shares may from time to time be traded, or in independently negotiated
transactions or otherwise; provided that such transactions will not include an
underwritten public offering. The Shares may be sold at market prices
prevailing at the time of sale or at negotiated prices. The Selling
Shareholders and any underwriters, dealers or agents that participate in
distribution of the Shares may be deemed to be underwriters, and any profit on
sale of the Shares by them and any discounts, commissions or concessions
received by any underwriter, dealer or agent may be deemed to be underwriting
discounts and commissions under the Securities Act. The methods by which the
Shares may be sold include (a) a block trade (which may involve crosses) in
which the broker or dealer so engaged will attempt to sell the securities as
agent but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal and
resale by such broker or dealer for its own account pursuant to this Prospectus;
(c) exchange distributions and/or secondary distributions in accordance with the
rules of NASDAQ; (d) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (e) privately negotiated transactions.
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The Company has agreed to register for sale under the Securities Act and
certain state securities laws the Shares and to indemnify the Selling
Shareholders and each person who participates as an underwriter in the offering
of the Shares, against certain civil liabilities, including certain liabilities
under the Securities Act.
There can be no assurances that the Selling Shareholders will sell any or
all of the Shares offered hereunder.
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon by Vinson &
Elkins L.L.P., Houston, Texas.
EXPERTS
The consolidated balance sheet of Southwest Bancorporation of Texas, Inc.
and Subsidiary as of December 31, 1997 and 1996 and the consolidated statements
of income, changes in shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1997, incorporated by reference in this
Prospectus, have been incorporated herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
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